05 Sep 2012

Corporate & Commercial Law Department

Practice Area(s): Corporate & Commercial |

We’ve all seen those “enter at your own risk” notices as you enter any type of business premises.  These “exemption” notices try to limit the legal liability of the owner or occupier of the premises if anyone suffers property damage or personal injury or dies on the premises.

In South Africa, exemption notices are dealt with by the common law.  They are also subject to the Constitution and the most recent law regulating them is the Consumer Protection Act, 68 of 2008 ("the CPA").  It came into effect on 1 April 2011.

The starting point is section 4(4) of the CPA which says that a court must interpret any "standard form, contract or other document" published by a supplier in favour of the consumer.  If an exemption notice is an "other document" then any ambiguity in that exemption notice is interpreted for the consumer’s benefit.  Any limitation or exclusion or removal of a consumer’s rights by that exemption notice must be restricted to the extent that a reasonable person would ordinarily expect in the circumstances.  Factors which a court must consider in this regard are the content of the exemption notice, how it is prepared and presented and the circumstances of the transaction or agreement.

Sections 49(1) and 49(3) to (5) of the CPA also govern notices to consumers (including exemption notices).  They require that any notice which limits a supplier’s liability or in terms of which the consumer assumes risk such as the exemption notices must be written in plain language (and the CPA has a long and complicated definition of “plain language"!), must be drawn to the consumer’s attention in a “conspicuous manner and form” that is likely to attract his attention if he is an “ordinarily alert consumer”.  In addition, the consumer has to have seen the exemption notice before he concludes the transaction or agreement, begins the activity, or enters or gains access to the facility or is required or offers payment for the transaction or agreement (whichever occurs earliest).  Finally in this long list, the notice must allow an "adequate opportunity in the circumstances" for the consumer to receive and understand it.

Section 22 of the CPA sets out the requirements for plain language.  Section 22(2) says that a notice is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice is intended, with average literacy skills and minimal experience as a consumer can be expected to understand the content, significance and importance of the notice.  The CPA does not explain what constitutes "average literacy skills and minimal experience as a consumer". The section also lists additional criteria to be considered when deciding whether the consumer could understand the notice.  These criteria are the context, comprehensiveness and consistency of the notice, its layout, vocabulary and sentence structure and use of pictures, examples or headings.

An important change to the common law emerges from section 49(2) which states that where a notice relates to an unusual or unexpected risk or a risk of serious injury or death, the consumer must sign or initial it or act in a way which shows that he was aware of the risk and accepted it.  Bungee jumping operators should take note of this.  The problem with this section of the CPA is that lots of quite usual activities involve potential for serious risk.  Air travel is one of them.  What we won’t know until our courts really start unpacking the practical meaning of the CPA in the cases which they hear is where the obligation to get consumers to sign exemption notices begins and ends.  Once again, in an attempt to try and cover everything, our law makers have only succeeded in creating uncertainty. 

Section 51(1)(c) of the CPA specifically says that an agreement must not be subject to a notice which purports to limit the supplier's liability for its gross negligence or that of its agent or anyone whom it controls.  Such a notice is void.

Regulation 44 to the CPA lists contract terms which are presumed to be unfair and unreasonable.  In other words, a provision which is presumed to be unfair can be proved to be fair, but the person who alleges that it is fair has to prove this.  Regulation 44(3)(d) says that a contract clause which has the effect or purpose of limiting the supplier's vicarious liability for its agents is rebuttably presumed to be unfair.  In the context of exemption notices, what this means is that the supplier will have to prove that notices which exempt the supplier from responsibility for the negligence of its agents are fair.  This is an important issue for those suppliers who regularly use agents and they should make sure that their contracts with their agents cover this exposure.

The CPA has significantly changed the law in relation to exemption notices.  What is critical is that if an exemption notice tries to restrict all liability it may be void.  If it is not worded simply, and clearly, or if it doesn’t jump out at you as you enter the supplier’s premises, it may not comply with the CPA and it will not protect the supplier or his business.  We strongly advise that every supplier takes another long hard look at its exemption notices.